Types of FA debts

Qualification debts: A debt that results from an individual (1.1.I.90) receiving a payment for which they were not eligible.

Example: An individual receives FA and it is later determined through data-matching that they were not a resident of Australia and were therefore not qualified to receive the payment.

Circumstance debts: Debts that may result from changes in a person's circumstances.

Example: If there is a change in care arrangements for an FTB child and the individual continues to receive payment on behalf of that child based on previous care arrangements, an overpayment may be incurred as a result of the change in the person's circumstances.

Reconciliation debts: Overpayments that result from an underestimation of family income. FTB individuals who receive payments as fortnightly instalments usually paid on the basis of an estimate of ATI (1.1.A.20) for an income (financial) year. The payment is reconciled at the end of the income year, after the individual and/or their partner (1.1.P.30) have lodged an income tax return, if required to do so, and the returns have been assessed by the ATO. If an individual received more FTB than they were entitled to receive for that income year, they would incur a reconciliation debt. This is also applicable for individuals who receive CCS or ACCS as fee reductions, and an underestimation of family income may result in a reconciliation debt. Reconciliation debts can also be raised for retrospective changes in circumstances.

Non-lodger debts: A non-lodger debt can occur where an FTB individual or their partner has not lodged an income tax return within the prescribed time. When an FTB individual receives FTB payments based on an estimated income and/or maintenance income during the income year and if they and/or their partner are required to lodge an income tax return for that year and they have not done so by 30 June of the lodgement year, the entire amount of FTB paid to them for the relevant income year may be raised as a non-lodger debt to the Commonwealth.

Identifying overpayments

FA overpayments may be identified in several ways including:

through the end of year reconciliation process, or

by the individual or ACO notifying Centrelink that their circumstances have changed (see example 1), or

by compliance activities undertaken by Centrelink, the Department of Education and Training or the ATO (see example 2).

Example 1: The person advises of a change of circumstances several weeks after the event occurred.

Example 2: Data-matching with other agencies such as the Department of Home Affairs.

Generally, an overpayment arises when an individual has been paid:

FA when they were not eligible for the whole, or part of the period, or

more FA than they were entitled to receive.

Raising overpayments

FA overpayments can be raised when there are changes in eligibility or changes in circumstances.

An overpayment due to eligibility that does not require verification of income details to accurately raise the overpayment is raised immediately and is not left until the reconciliation process.

Where available information suggests that changes in an individual's circumstance is likely to result in an overpayment, the overpayment should be raised immediately.

Recovering overpayments

If an overpayment of FA has been identified, and it is a debt due to the Commonwealth, the amount of the debt is normally recovered. For discussion on the various methods of debt recovery, refer to 7.2.

There are limited circumstances where recovery action for a debt is not taken, and the debt may be written off or waived. These are discussed in 7.3.

Centrelink & ATO responsibilities in relation to debts

Centrelink is responsible for identifying, raising and recovering FA debts. This includes offsetting FA top-ups against FA debts.

The ATO will offset an available tax refund (of the individual and/or any consenting person) against any FTB and/or CCS or ACCS debt to the extent of the available tax refund. Centrelink is responsible for recovering any remaining FTB and/or CCS or ACCS debt after any tax refund has been applied to the debt.

Recovery of debt from FTB individuals subject to prohibition of FTB based on an estimate

All individuals who are subject to a prohibition on being paid FTB based on an estimate will continue to be subject to any existing debt recovery action for their FA debts (that may include a non-lodger debt), with the exception of mandatory withholding, which will cease for as long as the prohibition is in place.

Example: Melissa is currently having $25 withheld from her fortnightly FTB instalment payments to repay an FA debt. Melissa becomes subject to a non-lodger decision resulting in a non-lodger debt and becomes subject to prohibition of FTB based on an estimate. Melissa's fortnightly instalment payments and her withholdings will cease, and new arrangements will need to be made to repay her FA debts.